JP/Business associations urge govt to ease value-added tax

Additional goods and services should be exempted in the upcoming amendment to the luxury and value-added tax (VAT) law, a trade association says.

Among the services proposed by the group are food catering, money transfers via the post office, parking fees and public phones, while goods included agricultural and foresty-based products, as well as fishery, livestock and plantation commodities.

Chairman of The Indonesian Association of Food and Beverage Manufacturers (GAPMMI) Thomas Dharmawan said catering companies should be free from VAT as they regularly pay restaurant taxes slapped on by local administrations.

"Catering businesses have been burdened with paying several types of regional taxes similar to the VAT. We think a VAT exemption will help them expand their business," he said during a hearing with the House's Commission IX on finance, national development planning, banking and non-bank financial institutions.

The House is planning to deliberate an amendment to the 1983 VAT and Luxury Tax Law after receiving feedback from various stakeholders. The amendment is aimed at luring more investors.

The commission will form a special team to discuss the amendment next week.

Scheduled to be implemented next year, the amendment is likely to cause some Rp 20 trillion (US$2.12 billion) in potential losses to the government during its first year, according to sources at the Director General of Taxation.

Agricultural products are among the goods to be exempted from VAT, with such an exemption expected to improve the chances of Indonesian produce on the world market.

The amendment should be a starting point for lowering the business sector's costs, said Hariyanto Sukamdani, vice chairman of tax, public policy, monetary, excise and customs affairs at the Indonesian Chamber of Commerce and Industry.

Under the amendment, the government also proposes to raise the luxury tax by between 10 and 200 percent, from its current standing of 75 percent of a luxury item's worth.

At the same time, it has raised next year's VAT target to Rp 245.4 trillion, from Rp 195.5 trillion, expecting to collect Rp 726.3 trillion in total tax revenue next year, up 19.2 percent from the Rp 641 trillion expected this year. (ewd)